Being eligible for a new mortgage is a difficult task, especially if you do not know the impact of your credit report score on your prospects of getting a loan. The first things a lender considers is your credit report or FICO score that help in deciding your eligibility for a mortgage loan.
It is a combined score that offers a quick overview of your overall responsibility rating while dealing with finances. It deals with the maintenance of repayment plans and your total debt to income ratio, job security etc. The better your credit report score, higher are your chances of being approved for the loan of your choice.
There are various other aspects that a lender looks into before coming to the decision about your eligibility for a mortgage. One of them is job stability. Lenders are aware that people who stick to the same field of work, have a higher chance of remaining employed and hence have a better chance of repaying the debt. Hence even though you have switched jobs recently, but have managed to go on advancing in the same field or have just switched employers but have managed to remain in the same type of job, you can be easily approved for a mortgage. The only problem you can experience is if there are any negative reasons for switching jobs.
With the automated credit report scoring being used in the lending business, there is no need to spend a lot of time deciding who is eligible for what credit rate. This brings more objectivity in the loan approval process. Due to this, the automated credit report score allows the lenders to narrow down the whole procedure to reviewing of your total score.
The disadvantage of this method is that few borrowers are prevented from obtaining loan amounts or interest rate of their choice. It is quite likely that a prospective borrower with adequate income may not get the loan that he can afford because of low standardized credit report score. Hence it is important that prospective borrowers remain alert about bettering their credit report scores and making timely payment of their bills. This process removes the problem of disputing a low credit report score.
There are 5 major factors that affect the composite credit report score. Being aware of these factors will allow the customers to take charge of their finances by making them capable of altering things for their benefit.
The first factor that affects your total credit report score is if you make timely payments of your debts. A person with low income but repays all the debts on time will have a high credit report score. Timing is the key and late payment in the recent past is much worse than many late payments few years ago.
The second is the collection accounts and public histories that affect your credit report score. This implies accounts that go to collection, foreclosure, and bankruptcies are disastrous to your score. Take care to see that these negatives do not come up on your credit report as they will better your credit report score significantly. Hence the correctness of your credit report is very important. Consumers should review their credit reports annually at least and ensure the information in it is correct.
Credit report scores less than 620 will need massive remedies to raise it to the acceptable level. This might take a long time, even years may pass. But in the end, it is worth it. You should establish a positive credit history that denotes long period of handling your finances in a matured way to eliminate the past negatives.